FTX customers file class action to lay claim to dwindling assets
By The livemint.com
FTX customers filed a class action lawsuit against the failed crypto
exchange and its former top executives including Sam Bankman
Fried on Tuesday, seeking a declaration that the company’s holdings
of digital assets belong to customers.
The lawsuit is the latest legal effort to lay claim to the dwindling
assets of FTX, which is already feuding with liquidators in the
Bahamas and Antigua as well as the bankruptcy estate of Blockfi,
another failed crypto company.
FTX pledged to segregate customer accounts and instead allowed
them to be misappropriated and therefore customers should be
repaid first, according to the lawsuit filed in U.S. Bankruptcy Court
in Delaware.
Customer class members should not have to stand in line along with
secured or general unsecured creditors in these bankruptcy
proceedings just to share in the diminished estate assets of the FTX
Group and Alameda,” said the complaint.
FTX did not immediately respond to a request for comment.
Bahamas-based FTX halted withdrawals last month and filed for
bankruptcy after customers rushed to pull their holdings from the
what was once the second-largest cryptocurrency exchange after
questions surfaced about its finances.
Bankman-Fried faces charges stemming from what a federal
prosecutor called a “fraud of epic proportions” that included
allegedly using customer funds to support his Alameda Research
crypto trading platform.
Bankman-Fried has acknowledged risk-management failures at FTX
but said he does not believe he has criminal liability.
He has not yet entered a plea and was released on a $250 million
bond last week that included restrictions on his travel.
The proposed class, which wants to represent more than 1 million
FTX customers in the United States and abroad, seeks a declaration
that traceable customer assets are not FTX property.
The customer class also wants the court to find specifically that
property held at Alameda that is traceable to customers is not
Alameda property, according to the complaint.
The lawsuit seeks a declaration from the court that funds held in
FTX U.S. accounts for U.S. customers and in FTX Trading accounts
for non-U.S. customers or other traceable customer assets are not
FTX property.
The customer class also wants the court to find specifically that
property held at Alameda that is traceable to customers is not
Alameda property, according to the complaint.
If the court determines it is FTX property, then the customers seek a
ruling that they have a priority right to repayment over other creditors.
Crypto companies are lightly regulated and often based outside the
United States and deposits are not guaranteed as U.S. bank and
brokerage deposits are, complicating the question of whether the
company or customers own the deposits.
